May 12, 2025 • 19 mins
Gleaming skyscrapers piercing clouds, private oceanfront villas, and movie set-worthy penthouses might capture our imagination when thinking about luxury real estate, but beneath the glossy surface lies a surprisingly nimble, multi-layered economic force that silently reshapes entire economies.
This fascinating sector acts as a powerful catalyst for economic growth despite representing just a tiny slice of the housing market. While luxury properties account for less than 5% of all real estate transactions, they can make up a staggering 25-35% of total market value in global financial centers like New York, London, and Hong Kong. Each high-end property transaction triggers a cascade of economic activity—supporting master craftspeople, interior designers, art consultants, specialty trades, and professional services. Industry estimates suggest a typical luxury deal generates substantial local economic benefits, with a multiplier effect of $2.15-$2.70 on local GDP for every dollar spent.
What might surprise you is luxury real estate's remarkable resilience during economic downturns. Unlike middle-market housing that depends heavily on mortgage financing, high-net-worth buyers often use their own funds or complex financing not tied directly to interest rates. During uncertain times, these properties function as tangible safe havens—physical stores of value similar to gold. This explains why luxury markets often bounce back faster after economic shocks, with recent data showing prime residential properties globally increased 2.9% in value during 2024 despite rising interest rates cooling other segments.
The global landscape is shifting dramatically, with emerging hotspots challenging established luxury centers. Dubai has positioned itself as a sanctuary for global elites with investor-friendly policies and world-class infrastructure, projected to lead luxury price growth at nearly 10% in 2025. Meanwhile, India's luxury market is booming through domestic growth, with sales jumping 38% year-on-year as rising incomes and changing lifestyles create new demand. These properties increasingly function as tools of soft power, with high-profile purchases enhancing a location's global reputation and influence.
Looking at luxury real estate through this wider lens reveals its true significance—not just as extravagant homes but as economic engines, diplomatic instruments, and barometers of global wealth flows. Subscribe to explore mor
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
luxury real estate.
When you hear that, I betcertain images just pop right
into your head, don't they?
Speaker 2 (00:05):
Oh yeah.
Speaker 1 (00:05):
You know gleaming skyscrapers that just pierce the
clouds, maybe those superprivate villas right on the
ocean you can almost hear thewaves.
And those penthouses.
You know, the ones that feelmore like a movie set than an
actual home.
Speaker 2 (00:18):
Right, pure fantasy stuff sometimes.
Speaker 1 (00:20):
Yeah.
It's easy to just file it underlives of the ultra rich, pure
extravagance, exactly, but whilethose images are definitely
part of it, there's this wholeother story simmering underneath
isn't there.
Speaker 2 (00:33):
There really is, and that's the fascinating part.
It's better to think of luxuryhousing as well, less like just
fancy buildings and more likethis dynamic, surprisingly
nimble industry.
Speaker 1 (00:43):
Nimble, how so.
Speaker 2 (00:45):
Well, it's quietly doing things like reshaping
whole economies, driving quite abit of job growth and acting as
this big magnet forinternational money.
It's much more than justexpensive addresses.
Speaker 1 (00:56):
Okay, yeah, that makes sense, and I think if
you're tuning in today, you'reprobably looking for something
deeper than just, you know,gawking at fancy house.
Hopefully.
Speaker 2 (01:08):
Our mission here is to really dig into this sector,
because it is oftenmisunderstood, and kind of pull
back the curtain on what itactually does.
Speaker 1 (01:12):
Yeah, look beyond the gloss.
Speaker 2 (01:14):
We want to explore how this corner of the market,
which seems kind of niche,actually works as this
multi-layered tool for acountry's economic growth and
even its global reputation.
Speaker 1 (01:28):
We'll be looking at how a really small number of
property deals can pack thishuge economic punch
disproportionately so.
Speaker 2 (01:36):
OK.
Speaker 1 (01:36):
And we'll dig into the surprising network of other
industries that basically get aboost from luxury real estate
Plus its resilience when theeconomy gets shaky is quite
interesting.
Speaker 2 (01:47):
And the new hotspots are emerging globally too.
Right, it's not just London andNew York anymore.
Speaker 1 (01:51):
Definitely not, and we'll look at how these high-end
properties pull in capital fromabroad and even how they play a
role in what people call softpower.
Speaker 2 (01:59):
Right, that subtle influence, and we're basing all
this on the insights we pulledfrom the pasted text you shared.
So, okay, let's start with thatcore idea how can such a tiny
slice of the market have such amassive impact?
It really comes down to thesheer concentration of capital.
It's quite striking.
I mean luxury property sales.
They're usually less than 5% ofall the housing deals out there
(02:21):
Tiny, yeah, tiny fraction.
But then you look at the bigfinancial centers New York,
london, hong Kong, places likethat and those few deals can
account for something like 25 to35 percent of the total market
value.
Speaker 1 (02:34):
Wow, ok, 25 to 35 percent, that's, that's huge.
Speaker 2 (02:38):
It's an extreme concentration of money, and
that's really the engine behindthe outsized impact we're
talking about.
Speaker 1 (02:45):
So it's clearly not just about a few very pricey
home swapping owners.
It's a major flow of capital.
You said it has significancebeyond just the one sale.
How does that work?
Speaker 2 (02:55):
Absolutely, because these aren't typically financed
like your average home purchase,you know, with the standard
mortgage Right.
Often luxury deals involve somepretty sophisticated financial
planning, things likecross-border asset allocation.
Speaker 1 (03:09):
So what's that exactly?
Speaker 2 (03:09):
It's essentially wealthy people, often
international, strategicallyplacing their investments in
different countries.
It's about managing risk,looking for returns, and
high-end property becomes one ofthose tangible assets in their
global portfolio.
Speaker 1 (03:24):
Ah, I see.
Speaker 2 (03:25):
The focus is very much on long-term value
retention.
It's treated a bit like, say,investing in fine art or blue
chip stocks.
Speaker 1 (03:32):
Oh.
So less about finding a placeto you know, hang your hat and
much more about a calculatedfinancial move with significant
sums of money.
Speaker 2 (03:41):
That's often a big part of it.
Speaker 1 (03:42):
yes, you drew an interesting parallel earlier to
the tech sector within the stockmarket.
Can you unpack that a bit morefor us, sure?
Speaker 2 (03:51):
Think about tech stocks as a sector.
Maybe it's not the biggestchunk of the total number of
companies listed on an exchange,but because of its innovation
and its growth potential, thesheer amount of investment it
attracts, well, its movementscan heavily influence the whole
market direction.
Right, it tells you a lot aboutinvestor confidence.
Speaker 1 (04:08):
Okay, yeah, I get that.
Speaker 2 (04:09):
Luxury real estate is kind of similar.
It's high value, yes, butrelatively low volume in terms
of transactions.
Yet the trends we see therewho's buying where at what
prices could be like an earlywarning signal for broader
market shifts and how thewealthy are feeling about the
economic outlook.
Speaker 1 (04:29):
That analogy really helps clarify that outsized
impact idea.
Okay, now let's get into thisripple effect, because it's
definitely not just the realestate agents having a good day
when a mansion sells, is it?
Speaker 2 (04:40):
Oh, not at all, not even close.
A single luxury property dealsets off this chain reaction
like dropping a pebble in a pond.
The ripple spread out to asurprising number of other
industries.
Speaker 1 (04:49):
Like what.
Give us some examples.
Speaker 2 (04:51):
Well, think about the actual building process first
Construction and architecture.
These aren't cookie cutterhomes, thank you.
Materials, completely custombespoke solutions so that
directly supports highly skilledtrades, people, master
carpenters, stonemasons,specialist installers and also
the company supplying thosepremium materials.
Speaker 1 (05:12):
Right, you're not picking up fittings from the
local DIY store for a $20million penthouse.
Speaker 2 (05:16):
Exactly right, and then okay, once it's built,
you've got the whole world ofinterior design and art.
Speaker 1 (05:22):
Ah, yeah.
Speaker 2 (05:22):
These places are often like blank canvases really
.
They bring in top interiordesigners, art consultants,
highly skilled craftspeople tocreate unique spaces that
sustains a whole internationalmarketplace for those services.
Speaker 1 (05:34):
So decorators, artists, furniture makers.
Speaker 2 (05:37):
Curators, framers the lot, and beyond that, many of
these amazing homes are used asvenues for exclusive events.
Oh interesting, which gives anice boost to local high-end
tourism.
Gourmet restaurants, cateringcompanies, event planners it all
connects so one sale can sendeconomic waves through
everything from constructionsites to art galleries.
(05:59):
It's a real ecosystem.
Speaker 1 (06:00):
It's like a mini economy just springs up around
each major transaction.
Speaker 2 (06:04):
That's a good way to put it.
We also shouldn't forget thespecialized professional
services needed you mean likelawyers and accountants.
Precisely the clients involved,especially if they're
international, have complexneeds.
They require help with thingslike sophisticated tax
structuring, ensuring they'recompliant with all the local
laws, getting expert financialadvice for the purchase and
(06:25):
holding of the asset.
Speaker 1 (06:26):
So a whole team of advisors gets involved too.
Speaker 2 (06:29):
Absolutely.
Speaker 1 (06:29):
Yeah.
Speaker 2 (06:29):
And the benefits can be really quite local,
geographically specific.
The text we looked at mentioned, for instance, how selling a
luxury villa on the FrenchRiviera or, say, the coast of
Portugal, that can directlysupport local businesses like
yacht servicing companies oreven boost exports of regional
speciality foods used in highend hospitality Wow, and there
(06:50):
are estimates.
You know.
A typical real estate deal isthought to generate somewhere
between, say, $125,000 and$160,000 in local economic
activity.
Luxury deals, just because oftheir sheer size, obviously
generate much, much more.
Speaker 1 (07:04):
And the text even tried to put a number on the
broader GDP impact, didn't it?
Speaker 2 (07:08):
It did.
Now it's tricky to get harddirect evidence specifically
isolating the multiplier forluxury real estate, but industry
estimates the ones in the textsuggest that for every dollar
spent on these top endproperties the total knock on
effect on the local GDP could besignificantly higher than for
standard housing.
Yeah, maybe in the range of$2.15 to $2.70, depending on the
(07:33):
local market specific.
Speaker 1 (07:34):
That's a substantial multiplier.
Speaker 2 (07:36):
It really underscores how this sector can function as
a pretty powerful economicengine beyond just the initial
sale price.
Speaker 1 (07:42):
It's easy to just see the big number and miss that
whole web of activity underneath.
Okay, now, one of the thingsthat might surprise people is
this idea of stability, luxuryreal estate holding firm when
the wider economy is, you know,hitting rough patches.
How does that actually work?
You'd think fancy purchaseswould be the first thing cut
back.
Speaker 2 (08:01):
Yeah, that's the intuitive thought, isn't it?
But the financing is key here.
It's very different from themiddle market.
Middle market housing reliesheavily on mortgages, so it's
super sensitive to interest ratechanges.
Banks tightening lendingstandards, that kind of thing
Right.
But high net worth individualsbuying luxury properties?
They often use their own funds,cash deals or complex financing
not tied directly to standardmortgage rates.
(08:23):
That makes the sector much lessvulnerable to interest rate
hikes and general lendingvolatility.
Speaker 1 (08:28):
Ah, ok, so they're not waiting on bank approvals in
the same way.
That makes a huge difference.
Speaker 2 (08:33):
It does.
And there's another factor Forthese buyers it's often not just
about getting a nice house.
During uncertain times economiccrises, geopolitical stress
they actively seek safe placesto park their capital.
A safe haven Exactly Luxuryreal estate is seen as a
tangible, stable asset, almostlike a physical version of gold.
(08:54):
It's seen as a reliable storeof value when other markets are
turbulent.
Speaker 1 (08:57):
And we've actually seen this play out, haven't we?
Speaker 2 (08:59):
We have.
The text points out that afterthe 2008 financial meltdown and
again after the shock of the2020 pandemic, luxury markets
often bounce back much fasterthan the general housing market
Faster, really Faster, and insome key locations prices even
appreciated, while othersegments were still falling.
It really shifts theperspective on its role during
(09:20):
downturns.
Speaker 1 (09:21):
That is definitely counterintuitive.
The text even had some recentnumbers from 2024.
Speaker 2 (09:26):
Yes, quite current.
Despite rising interest ratesputting a chill on many housing
markets globally.
This year the data showedprices for prime residential
properties that top tieractually went up globally by
about 2.9 percent.
That's according toKnight-Frank's index.
Speaker 1 (09:41):
OK, so an overall increase despite headwinds Paris
, new York, singapore.
Speaker 2 (09:49):
the growth was even stronger, somewhere between 3.5%
and 6%, mainly because there'sjust not enough supply of these
kinds of properties and demandfrom the very wealthy remains
strong.
Speaker 1 (09:59):
So while lots of people are feeling the pinch,
the very top of the market seemsalmost insulated.
Speaker 2 (10:05):
It often behaves that way.
Yes, the text made thatcomparison to gold, didn't it?
Speaker 1 (10:08):
Yeah.
Speaker 2 (10:09):
Luxury real estate is this physical thing that people
trust to hold its value wheneverything else feels uncertain.
Speaker 1 (10:14):
Like a really really nice safe deposit box with a
great view.
Speaker 2 (10:19):
Okay, let's pivot a bit now and look at the global
MAC, Because it feels like thecenters of gravity in luxury
real estate are shifting right.
It's not just the same oldcities dominating anymore.
Speaker 1 (10:30):
That's definitely true.
The landscape is changing.
I mean, yes, established hubslike London and Hong Kong are
still major players, absolutely,but we're seeing some new
contenders really rising fastand reshaping the whole game.
Speaker 2 (10:42):
And Dubai seems to be front and center in that shift.
Speaker 1 (10:45):
Dubai is a prime example.
Yes, it's become a reallysignificant global hug lately.
Speaker 2 (10:49):
What's behind that surge there?
What's driving it?
Speaker 1 (10:52):
It seems to be a mix of things really.
Dubai has been very proactive,very strategic, creating an
investor-friendly climate,offering attractive tax benefits
and building truly world-class,cutting-edge infrastructure.
Speaker 2 (11:03):
And it's paying off, Apparently so.
Speaker 1 (11:06):
Knight Frank is forecasting that Dubai will
probably lead the world inluxury price growth next year,
2025.
They're projecting almost 10next year, 2025.
They're projecting almost 10%growth 9.9% Wow, nearly 10%.
That's way ahead of the globalaverage you mentioned.
Why is it such a magnet rightnow for the super rich?
Speaker 2 (11:22):
Well, it seems to be increasingly viewed as a stable,
secure place, a sanctuaryalmost, for global elites who
are maybe looking to move awayfrom geopolitical risks or
instability in other parts ofthe world.
Speaker 1 (11:36):
Safe harbor again.
Speaker 2 (11:37):
Kind of, and as a result, we're seeing this boom
in the really high end dealstransactions over, say, $25
million.
It's really cementing Dubai'sposition as a top global
destination for luxury propertyinvestment.
Speaker 1 (11:50):
OK.
So it's pulling ininternational wealth, seeking
stability and, I guess,opportunity too.
Now the text also highlightedIndia as another area with big
growth in luxury housing, butfor different reasons.
Speaker 2 (12:01):
Yes, and that's a really important contrast to
draw.
Unlike Dubai, which reliesheavily on attracting foreign
capital, India's luxury marketboom seems to be driven much
more by domestic factors.
Speaker 1 (12:11):
Internal growth.
Speaker 2 (12:12):
Exactly.
The numbers are quite somethingnearly 38% growth year on year
in luxury home sales,specifically properties valued
at four crore rupees and up.
That's for the first ninemonths of 2024.
Speaker 1 (12:23):
38%.
That's massive growth, all fromwithin India.
What's fueling that?
Speaker 2 (12:29):
It seems to reflect these bigger socioeconomic
shifts happening within India.
What's fueling that?
It seems to reflect thesebigger socioeconomic shifts
happening within India itself.
You've got rising incomes,changing urban lifestyles,
people wanting different kindsof homes and, crucially, better
availability of like structuredfinancing options for these
higher value properties.
So it's not just theestablished, you know ultra
wealthy families buying anymore.
(12:50):
It's bringing in a newersegment upscale professionals,
entrepreneurs into the luxurymarket.
Speaker 1 (12:57):
So a sign of a growing middle upper class.
Speaker 2 (12:59):
I think that's exactly what it indicates a sign
of a maturing economy wheremore people are achieving that
level of prosperity.
So you have these twointeresting dynamics Dubai
attracting global wealth.
India's growth powered fromwithin paints a fascinating
picture of how global influenceis shifting.
Speaker 1 (13:19):
It really does.
Okay, let's dig into how theseupscale property markets
actually draw in thatinternational capital.
It's clearly more than just theseller getting paid right.
Governments seem interested too.
Speaker 2 (13:25):
Oh, absolutely.
Governments are increasinglysavvy about this.
They see these high-endproperty markets as pretty
effective tools for attractingforeign investment.
Speaker 1 (13:35):
Yeah.
Speaker 2 (13:36):
And many actively encourage luxury residential
development for precisely thatreason.
Speaker 1 (13:41):
Why?
What are the benefits for thecountry beyond just the cash
from the sale?
Speaker 2 (13:46):
Well, several things.
For starters, it helps widenthe tax base.
You get revenue from propertytaxes, transfer duties, maybe
wealth taxes levies.
Speaker 1 (13:54):
Okay, more tax income .
Speaker 2 (14:00):
Right.
It also provides a stimulus fora whole range of related
industries.
We touched on this with theripple effect.
Things like private aviation,luxury, retail, high-end tourism
, hospitality.
Speaker 1 (14:05):
Right, the ecosystem effect again.
Speaker 2 (14:07):
Exactly, and it can even spur demand for premium
local products or services thatappeal to that clientele Maybe
high-end local crafts, bespokedesign services, things like
that.
Speaker 1 (14:16):
So one luxury home sale can act as this catalyst,
boosting spending across manydifferent local sectors.
Speaker 2 (14:22):
Precisely, and governments have different
strategies to try and capturethis.
The text mentioned things likegolden visa programs.
Speaker 1 (14:29):
Ah, yes, I've heard of those.
Speaker 2 (14:31):
Countries like Spain, greece, portugal have used them
Basically.
They offer residency permits,sometimes even a path to
citizenship, if you make asubstantial investment, often
including buying property abovea certain value.
Speaker 1 (14:43):
So a direct financial incentive to bring in foreign
buyers and their capital.
Speaker 2 (14:48):
It's a very direct lure.
But then on the flip side youhave other countries mentioned,
like Canada, the UK, australia,where they've actually brought
in measures to restrict foreignbuying, things like special
foreign buyer taxes or, in somecases, outright bans on
non-residents buying certaintypes of property.
Speaker 1 (15:06):
Why would they do that?
Speaker 2 (15:08):
Usually it's a response to concerns about
housing affordability for theirown citizens or worries about
speculative buying overheatingthe market.
It shows there's this delicatebalancing act Right.
Speaker 1 (15:19):
Attract the money, but don't price out your locals.
Speaker 2 (15:21):
Exactly.
It becomes almost a form oflike Economic diplomacy, using
property to build internationalties and attract capital, but
always having to weigh thatagainst national interests and
domestic concerns.
Speaker 1 (15:33):
Fascinating tightrope to walk.
Ok, let's talk about the finalangle here.
This idea of soft power howdoes a fancy house contribute to
a country's cultural influence?
Seems a bit abstract.
Speaker 2 (15:45):
It is a bit more subtle, yeah, but the effect can
be quite powerful.
It ties into what the textcalled the celebrity effect,
though it's broader than justmovie stars.
Ok, when really prominentpeople could be celebrities, yes
, but also influential businessleaders, major philanthropists,
cultural figures.
When they choose to buysignificant property somewhere,
it sends a signal.
Speaker 1 (16:06):
What kind of signal?
Speaker 2 (16:07):
It implicitly says this place is desirable, it's
appealing, it's safe, it'sculturally interesting, it's
somewhere people like me want tobe.
It's a kind of globalendorsement.
Speaker 1 (16:16):
Ah, ok, like a stamp of approval.
Speaker 2 (16:18):
Sort of and remember soft power is about influencing
others through attraction andpersuasion, not force.
So when a country gets knownfor having these incredible
luxury homes that attractdiscerning global buyers, it
subtly burnishes its image,makes it seem more prosperous,
sophisticated, desirable.
That enhances its overallstanding and influence.
Speaker 1 (16:38):
And this celebrity effect has knock-on effects.
Speaker 2 (16:41):
It often does, that initial high-profile purchase
can attract other things.
Maybe luxury brands decide toopen stores nearby.
Famous chefs might set uprestaurants.
Cultural festivals mightflourish because it's seen as a
hotspot.
Speaker 1 (16:54):
Right Creates a buzz.
Speaker 2 (16:56):
Exactly Now.
It's hard to stick a precisenumber on this kind of influence
, obviously Sure, but thebranding power it generates for
a city or region is prettydefinite and often quite strong.
Region is pretty definite andoften quite strong.
It's like these properties actas flagships, showcasing the
location's appeal to the rest ofthe world.
The text used that greatexample George Clooney's villa
(17:19):
on Lake Como, Perfect example.
Even years later, thatassociation still draws tourists
, boosts the area's profile,adds to its cachet.
Speaker 1 (17:27):
Yeah, I can see that.
Speaker 2 (17:28):
So you could almost think of these luxury properties
as being like the red carpetfor urban branding.
They attract attention, theyconfer status, they project
influence globally.
Speaker 1 (17:37):
It's really quite something how we started off
thinking about, you know, justshiny towers and beach houses,
and now we see it's so much morecomplex.
It really has evolved, hasn'tit?
Speaker 2 (17:47):
It absolutely has.
What might have once beendismissed as, just you know, a
playground for the super rich,it clearly becomes something
else.
Speaker 1 (17:59):
It's really a significant pillar in modern
economic strategy for manyplaces.
Yeah, playing this integralrole in well everything from
driving international growth andcreating jobs to stimulating
GDP, even playing a part indiplomacy and attracting
investment.
Speaker 2 (18:09):
All of those things, and when you factor in the big
global trends like increasingurbanization, more people living
in cities and the ongoingconcentration of wealth at the
top, it seems pretty likely thatthe importance of this luxury
real estate sector is only goingto grow.
Speaker 1 (18:24):
So policymakers, financiers, they really need to
look past the extravagance label.
Speaker 2 (18:29):
I think so.
They need to see it for what itis, both a serious asset class
in its own right and also,increasingly, a tool with real
geopolitical weight.
Speaker 1 (18:37):
So, as you, our listener, are making sense of
this complicated world we livein?
Maybe think about this.
In a time when stability oftenfeels like a rare thing and
perception counts for so much,these luxury homes offer
something quite unique.
Speaker 2 (18:53):
What's that?
Speaker 1 (18:53):
Well, they don't just provide a literal view, often
from an amazing spot.
They also offer a valuable view, a perspective into those
bigger economic forces, thegeopolitical currents that are
really shaping things all aroundus.
luxury real estate.
When you hear that, I betcertain images just pop right
into your head, don't they?
Speaker 2 (00:05):
Oh yeah.
Speaker 1 (00:05):
You know gleaming skyscrapers that just pierce the
clouds, maybe those superprivate villas right on the
ocean you can almost hear thewaves.
And those penthouses.
You know, the ones that feelmore like a movie set than an
actual home.
Speaker 2 (00:18):
Right, pure fantasy stuff sometimes.
Speaker 1 (00:20):
Yeah.
It's easy to just file it underlives of the ultra rich, pure
extravagance, exactly, but whilethose images are definitely
part of it, there's this wholeother story simmering underneath
isn't there.
Speaker 2 (00:33):
There really is, and that's the fascinating part.
It's better to think of luxuryhousing as well, less like just
fancy buildings and more likethis dynamic, surprisingly
nimble industry.
Speaker 1 (00:43):
Nimble, how so.
Speaker 2 (00:45):
Well, it's quietly doing things like reshaping
whole economies, driving quite abit of job growth and acting as
this big magnet forinternational money.
It's much more than justexpensive addresses.
Speaker 1 (00:56):
Okay, yeah, that makes sense, and I think if
you're tuning in today, you'reprobably looking for something
deeper than just, you know,gawking at fancy house.
Hopefully.
Speaker 2 (01:08):
Our mission here is to really dig into this sector,
because it is oftenmisunderstood, and kind of pull
back the curtain on what itactually does.
Speaker 1 (01:12):
Yeah, look beyond the gloss.
Speaker 2 (01:14):
We want to explore how this corner of the market,
which seems kind of niche,actually works as this
multi-layered tool for acountry's economic growth and
even its global reputation.
Speaker 1 (01:28):
We'll be looking at how a really small number of
property deals can pack thishuge economic punch
disproportionately so.
Speaker 2 (01:36):
OK.
Speaker 1 (01:36):
And we'll dig into the surprising network of other
industries that basically get aboost from luxury real estate
Plus its resilience when theeconomy gets shaky is quite
interesting.
Speaker 2 (01:47):
And the new hotspots are emerging globally too.
Right, it's not just London andNew York anymore.
Speaker 1 (01:51):
Definitely not, and we'll look at how these high-end
properties pull in capital fromabroad and even how they play a
role in what people call softpower.
Speaker 2 (01:59):
Right, that subtle influence, and we're basing all
this on the insights we pulledfrom the pasted text you shared.
So, okay, let's start with thatcore idea how can such a tiny
slice of the market have such amassive impact?
It really comes down to thesheer concentration of capital.
It's quite striking.
I mean luxury property sales.
They're usually less than 5% ofall the housing deals out there
(02:21):
Tiny, yeah, tiny fraction.
But then you look at the bigfinancial centers New York,
london, hong Kong, places likethat and those few deals can
account for something like 25 to35 percent of the total market
value.
Speaker 1 (02:34):
Wow, ok, 25 to 35 percent, that's, that's huge.
Speaker 2 (02:38):
It's an extreme concentration of money, and
that's really the engine behindthe outsized impact we're
talking about.
Speaker 1 (02:45):
So it's clearly not just about a few very pricey
home swapping owners.
It's a major flow of capital.
You said it has significancebeyond just the one sale.
How does that work?
Speaker 2 (02:55):
Absolutely, because these aren't typically financed
like your average home purchase,you know, with the standard
mortgage Right.
Often luxury deals involve somepretty sophisticated financial
planning, things likecross-border asset allocation.
Speaker 1 (03:09):
So what's that exactly?
Speaker 2 (03:09):
It's essentially wealthy people, often
international, strategicallyplacing their investments in
different countries.
It's about managing risk,looking for returns, and
high-end property becomes one ofthose tangible assets in their
global portfolio.
Speaker 1 (03:24):
Ah, I see.
Speaker 2 (03:25):
The focus is very much on long-term value
retention.
It's treated a bit like, say,investing in fine art or blue
chip stocks.
Speaker 1 (03:32):
Oh.
So less about finding a placeto you know, hang your hat and
much more about a calculatedfinancial move with significant
sums of money.
Speaker 2 (03:41):
That's often a big part of it.
Speaker 1 (03:42):
yes, you drew an interesting parallel earlier to
the tech sector within the stockmarket.
Can you unpack that a bit morefor us, sure?
Speaker 2 (03:51):
Think about tech stocks as a sector.
Maybe it's not the biggestchunk of the total number of
companies listed on an exchange,but because of its innovation
and its growth potential, thesheer amount of investment it
attracts, well, its movementscan heavily influence the whole
market direction.
Right, it tells you a lot aboutinvestor confidence.
Speaker 1 (04:08):
Okay, yeah, I get that.
Speaker 2 (04:09):
Luxury real estate is kind of similar.
It's high value, yes, butrelatively low volume in terms
of transactions.
Yet the trends we see therewho's buying where at what
prices could be like an earlywarning signal for broader
market shifts and how thewealthy are feeling about the
economic outlook.
Speaker 1 (04:29):
That analogy really helps clarify that outsized
impact idea.
Okay, now let's get into thisripple effect, because it's
definitely not just the realestate agents having a good day
when a mansion sells, is it?
Speaker 2 (04:40):
Oh, not at all, not even close.
A single luxury property dealsets off this chain reaction
like dropping a pebble in a pond.
The ripple spread out to asurprising number of other
industries.
Speaker 1 (04:49):
Like what.
Give us some examples.
Speaker 2 (04:51):
Well, think about the actual building process first
Construction and architecture.
These aren't cookie cutterhomes, thank you.
Materials, completely custombespoke solutions so that
directly supports highly skilledtrades, people, master
carpenters, stonemasons,specialist installers and also
the company supplying thosepremium materials.
Speaker 1 (05:12):
Right, you're not picking up fittings from the
local DIY store for a $20million penthouse.
Speaker 2 (05:16):
Exactly right, and then okay, once it's built,
you've got the whole world ofinterior design and art.
Speaker 1 (05:22):
Ah, yeah.
Speaker 2 (05:22):
These places are often like blank canvases really
.
They bring in top interiordesigners, art consultants,
highly skilled craftspeople tocreate unique spaces that
sustains a whole internationalmarketplace for those services.
Speaker 1 (05:34):
So decorators, artists, furniture makers.
Speaker 2 (05:37):
Curators, framers the lot, and beyond that, many of
these amazing homes are used asvenues for exclusive events.
Oh interesting, which gives anice boost to local high-end
tourism.
Gourmet restaurants, cateringcompanies, event planners it all
connects so one sale can sendeconomic waves through
everything from constructionsites to art galleries.
(05:59):
It's a real ecosystem.
Speaker 1 (06:00):
It's like a mini economy just springs up around
each major transaction.
Speaker 2 (06:04):
That's a good way to put it.
We also shouldn't forget thespecialized professional
services needed you mean likelawyers and accountants.
Precisely the clients involved,especially if they're
international, have complexneeds.
They require help with thingslike sophisticated tax
structuring, ensuring they'recompliant with all the local
laws, getting expert financialadvice for the purchase and
(06:25):
holding of the asset.
Speaker 1 (06:26):
So a whole team of advisors gets involved too.
Speaker 2 (06:29):
Absolutely.
Speaker 1 (06:29):
Yeah.
Speaker 2 (06:29):
And the benefits can be really quite local,
geographically specific.
The text we looked at mentioned, for instance, how selling a
luxury villa on the FrenchRiviera or, say, the coast of
Portugal, that can directlysupport local businesses like
yacht servicing companies oreven boost exports of regional
speciality foods used in highend hospitality Wow, and there
(06:50):
are estimates.
You know.
A typical real estate deal isthought to generate somewhere
between, say, $125,000 and$160,000 in local economic
activity.
Luxury deals, just because oftheir sheer size, obviously
generate much, much more.
Speaker 1 (07:04):
And the text even tried to put a number on the
broader GDP impact, didn't it?
Speaker 2 (07:08):
It did.
Now it's tricky to get harddirect evidence specifically
isolating the multiplier forluxury real estate, but industry
estimates the ones in the textsuggest that for every dollar
spent on these top endproperties the total knock on
effect on the local GDP could besignificantly higher than for
standard housing.
Yeah, maybe in the range of$2.15 to $2.70, depending on the
(07:33):
local market specific.
Speaker 1 (07:34):
That's a substantial multiplier.
Speaker 2 (07:36):
It really underscores how this sector can function as
a pretty powerful economicengine beyond just the initial
sale price.
Speaker 1 (07:42):
It's easy to just see the big number and miss that
whole web of activity underneath.
Okay, now, one of the thingsthat might surprise people is
this idea of stability, luxuryreal estate holding firm when
the wider economy is, you know,hitting rough patches.
How does that actually work?
You'd think fancy purchaseswould be the first thing cut
back.
Speaker 2 (08:01):
Yeah, that's the intuitive thought, isn't it?
But the financing is key here.
It's very different from themiddle market.
Middle market housing reliesheavily on mortgages, so it's
super sensitive to interest ratechanges.
Banks tightening lendingstandards, that kind of thing
Right.
But high net worth individualsbuying luxury properties?
They often use their own funds,cash deals or complex financing
not tied directly to standardmortgage rates.
(08:23):
That makes the sector much lessvulnerable to interest rate
hikes and general lendingvolatility.
Speaker 1 (08:28):
Ah, ok, so they're not waiting on bank approvals in
the same way.
That makes a huge difference.
Speaker 2 (08:33):
It does.
And there's another factor Forthese buyers it's often not just
about getting a nice house.
During uncertain times economiccrises, geopolitical stress
they actively seek safe placesto park their capital.
A safe haven Exactly Luxuryreal estate is seen as a
tangible, stable asset, almostlike a physical version of gold.
(08:54):
It's seen as a reliable storeof value when other markets are
turbulent.
Speaker 1 (08:57):
And we've actually seen this play out, haven't we?
Speaker 2 (08:59):
We have.
The text points out that afterthe 2008 financial meltdown and
again after the shock of the2020 pandemic, luxury markets
often bounce back much fasterthan the general housing market
Faster, really Faster, and insome key locations prices even
appreciated, while othersegments were still falling.
It really shifts theperspective on its role during
(09:20):
downturns.
Speaker 1 (09:21):
That is definitely counterintuitive.
The text even had some recentnumbers from 2024.
Speaker 2 (09:26):
Yes, quite current.
Despite rising interest ratesputting a chill on many housing
markets globally.
This year the data showedprices for prime residential
properties that top tieractually went up globally by
about 2.9 percent.
That's according toKnight-Frank's index.
Speaker 1 (09:41):
OK, so an overall increase despite headwinds Paris
, new York, singapore.
Speaker 2 (09:49):
the growth was even stronger, somewhere between 3.5%
and 6%, mainly because there'sjust not enough supply of these
kinds of properties and demandfrom the very wealthy remains
strong.
Speaker 1 (09:59):
So while lots of people are feeling the pinch,
the very top of the market seemsalmost insulated.
Speaker 2 (10:05):
It often behaves that way.
Yes, the text made thatcomparison to gold, didn't it?
Speaker 1 (10:08):
Yeah.
Speaker 2 (10:09):
Luxury real estate is this physical thing that people
trust to hold its value wheneverything else feels uncertain.
Speaker 1 (10:14):
Like a really really nice safe deposit box with a
great view.
Speaker 2 (10:19):
Okay, let's pivot a bit now and look at the global
MAC, Because it feels like thecenters of gravity in luxury
real estate are shifting right.
It's not just the same oldcities dominating anymore.
Speaker 1 (10:30):
That's definitely true.
The landscape is changing.
I mean, yes, established hubslike London and Hong Kong are
still major players, absolutely,but we're seeing some new
contenders really rising fastand reshaping the whole game.
Speaker 2 (10:42):
And Dubai seems to be front and center in that shift.
Speaker 1 (10:45):
Dubai is a prime example.
Yes, it's become a reallysignificant global hug lately.
Speaker 2 (10:49):
What's behind that surge there?
What's driving it?
Speaker 1 (10:52):
It seems to be a mix of things really.
Dubai has been very proactive,very strategic, creating an
investor-friendly climate,offering attractive tax benefits
and building truly world-class,cutting-edge infrastructure.
Speaker 2 (11:03):
And it's paying off, Apparently so.
Speaker 1 (11:06):
Knight Frank is forecasting that Dubai will
probably lead the world inluxury price growth next year,
2025.
They're projecting almost 10next year, 2025.
They're projecting almost 10%growth 9.9% Wow, nearly 10%.
That's way ahead of the globalaverage you mentioned.
Why is it such a magnet rightnow for the super rich?
Speaker 2 (11:22):
Well, it seems to be increasingly viewed as a stable,
secure place, a sanctuaryalmost, for global elites who
are maybe looking to move awayfrom geopolitical risks or
instability in other parts ofthe world.
Speaker 1 (11:36):
Safe harbor again.
Speaker 2 (11:37):
Kind of, and as a result, we're seeing this boom
in the really high end dealstransactions over, say, $25
million.
It's really cementing Dubai'sposition as a top global
destination for luxury propertyinvestment.
Speaker 1 (11:50):
OK.
So it's pulling ininternational wealth, seeking
stability and, I guess,opportunity too.
Now the text also highlightedIndia as another area with big
growth in luxury housing, butfor different reasons.
Speaker 2 (12:01):
Yes, and that's a really important contrast to
draw.
Unlike Dubai, which reliesheavily on attracting foreign
capital, India's luxury marketboom seems to be driven much
more by domestic factors.
Speaker 1 (12:11):
Internal growth.
Speaker 2 (12:12):
Exactly.
The numbers are quite somethingnearly 38% growth year on year
in luxury home sales,specifically properties valued
at four crore rupees and up.
That's for the first ninemonths of 2024.
Speaker 1 (12:23):
38%.
That's massive growth, all fromwithin India.
What's fueling that?
Speaker 2 (12:29):
It seems to reflect these bigger socioeconomic
shifts happening within India.
What's fueling that?
It seems to reflect thesebigger socioeconomic shifts
happening within India itself.
You've got rising incomes,changing urban lifestyles,
people wanting different kindsof homes and, crucially, better
availability of like structuredfinancing options for these
higher value properties.
So it's not just theestablished, you know ultra
wealthy families buying anymore.
(12:50):
It's bringing in a newersegment upscale professionals,
entrepreneurs into the luxurymarket.
Speaker 1 (12:57):
So a sign of a growing middle upper class.
Speaker 2 (12:59):
I think that's exactly what it indicates a sign
of a maturing economy wheremore people are achieving that
level of prosperity.
So you have these twointeresting dynamics Dubai
attracting global wealth.
India's growth powered fromwithin paints a fascinating
picture of how global influenceis shifting.
Speaker 1 (13:19):
It really does.
Okay, let's dig into how theseupscale property markets
actually draw in thatinternational capital.
It's clearly more than just theseller getting paid right.
Governments seem interested too.
Speaker 2 (13:25):
Oh, absolutely.
Governments are increasinglysavvy about this.
They see these high-endproperty markets as pretty
effective tools for attractingforeign investment.
Speaker 1 (13:35):
Yeah.
Speaker 2 (13:36):
And many actively encourage luxury residential
development for precisely thatreason.
Speaker 1 (13:41):
Why?
What are the benefits for thecountry beyond just the cash
from the sale?
Speaker 2 (13:46):
Well, several things.
For starters, it helps widenthe tax base.
You get revenue from propertytaxes, transfer duties, maybe
wealth taxes levies.
Speaker 1 (13:54):
Okay, more tax income .
Speaker 2 (14:00):
Right.
It also provides a stimulus fora whole range of related
industries.
We touched on this with theripple effect.
Things like private aviation,luxury, retail, high-end tourism
, hospitality.
Speaker 1 (14:05):
Right, the ecosystem effect again.
Speaker 2 (14:07):
Exactly, and it can even spur demand for premium
local products or services thatappeal to that clientele Maybe
high-end local crafts, bespokedesign services, things like
that.
Speaker 1 (14:16):
So one luxury home sale can act as this catalyst,
boosting spending across manydifferent local sectors.
Speaker 2 (14:22):
Precisely, and governments have different
strategies to try and capturethis.
The text mentioned things likegolden visa programs.
Speaker 1 (14:29):
Ah, yes, I've heard of those.
Speaker 2 (14:31):
Countries like Spain, greece, portugal have used them
Basically.
They offer residency permits,sometimes even a path to
citizenship, if you make asubstantial investment, often
including buying property abovea certain value.
Speaker 1 (14:43):
So a direct financial incentive to bring in foreign
buyers and their capital.
Speaker 2 (14:48):
It's a very direct lure.
But then on the flip side youhave other countries mentioned,
like Canada, the UK, australia,where they've actually brought
in measures to restrict foreignbuying, things like special
foreign buyer taxes or, in somecases, outright bans on
non-residents buying certaintypes of property.
Speaker 1 (15:06):
Why would they do that?
Speaker 2 (15:08):
Usually it's a response to concerns about
housing affordability for theirown citizens or worries about
speculative buying overheatingthe market.
It shows there's this delicatebalancing act Right.
Speaker 1 (15:19):
Attract the money, but don't price out your locals.
Speaker 2 (15:21):
Exactly.
It becomes almost a form oflike Economic diplomacy, using
property to build internationalties and attract capital, but
always having to weigh thatagainst national interests and
domestic concerns.
Speaker 1 (15:33):
Fascinating tightrope to walk.
Ok, let's talk about the finalangle here.
This idea of soft power howdoes a fancy house contribute to
a country's cultural influence?
Seems a bit abstract.
Speaker 2 (15:45):
It is a bit more subtle, yeah, but the effect can
be quite powerful.
It ties into what the textcalled the celebrity effect,
though it's broader than justmovie stars.
Ok, when really prominentpeople could be celebrities, yes
, but also influential businessleaders, major philanthropists,
cultural figures.
When they choose to buysignificant property somewhere,
it sends a signal.
Speaker 1 (16:06):
What kind of signal?
Speaker 2 (16:07):
It implicitly says this place is desirable, it's
appealing, it's safe, it'sculturally interesting, it's
somewhere people like me want tobe.
It's a kind of globalendorsement.
Speaker 1 (16:16):
Ah, ok, like a stamp of approval.
Speaker 2 (16:18):
Sort of and remember soft power is about influencing
others through attraction andpersuasion, not force.
So when a country gets knownfor having these incredible
luxury homes that attractdiscerning global buyers, it
subtly burnishes its image,makes it seem more prosperous,
sophisticated, desirable.
That enhances its overallstanding and influence.
Speaker 1 (16:38):
And this celebrity effect has knock-on effects.
Speaker 2 (16:41):
It often does, that initial high-profile purchase
can attract other things.
Maybe luxury brands decide toopen stores nearby.
Famous chefs might set uprestaurants.
Cultural festivals mightflourish because it's seen as a
hotspot.
Speaker 1 (16:54):
Right Creates a buzz.
Speaker 2 (16:56):
Exactly Now.
It's hard to stick a precisenumber on this kind of influence
, obviously Sure, but thebranding power it generates for
a city or region is prettydefinite and often quite strong.
Region is pretty definite andoften quite strong.
It's like these properties actas flagships, showcasing the
location's appeal to the rest ofthe world.
The text used that greatexample George Clooney's villa
(17:19):
on Lake Como, Perfect example.
Even years later, thatassociation still draws tourists
, boosts the area's profile,adds to its cachet.
Speaker 1 (17:27):
Yeah, I can see that.
Speaker 2 (17:28):
So you could almost think of these luxury properties
as being like the red carpetfor urban branding.
They attract attention, theyconfer status, they project
influence globally.
Speaker 1 (17:37):
It's really quite something how we started off
thinking about, you know, justshiny towers and beach houses,
and now we see it's so much morecomplex.
It really has evolved, hasn'tit?
Speaker 2 (17:47):
It absolutely has.
What might have once beendismissed as, just you know, a
playground for the super rich,it clearly becomes something
else.
Speaker 1 (17:59):
It's really a significant pillar in modern
economic strategy for manyplaces.
Yeah, playing this integralrole in well everything from
driving international growth andcreating jobs to stimulating
GDP, even playing a part indiplomacy and attracting
investment.
Speaker 2 (18:09):
All of those things, and when you factor in the big
global trends like increasingurbanization, more people living
in cities and the ongoingconcentration of wealth at the
top, it seems pretty likely thatthe importance of this luxury
real estate sector is only goingto grow.
Speaker 1 (18:24):
So policymakers, financiers, they really need to
look past the extravagance label.
Speaker 2 (18:29):
I think so.
They need to see it for what itis, both a serious asset class
in its own right and also,increasingly, a tool with real
geopolitical weight.
Speaker 1 (18:37):
So, as you, our listener, are making sense of
this complicated world we livein?
Maybe think about this.
In a time when stability oftenfeels like a rare thing and
perception counts for so much,these luxury homes offer
something quite unique.
Speaker 2 (18:53):
What's that?
Speaker 1 (18:53):
Well, they don't just provide a literal view, often
from an amazing spot.
They also offer a valuable view, a perspective into those
bigger economic forces, thegeopolitical currents that are
really shaping things all aroundus.
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